Summary

Due to geopolitical tensions and the state of war witnessed by the Middle East region during the past period, foreign portfolio investments recorded a net outflow of about $9.5 billion during the first quarter of this year, coinciding with the outbreak of the conflict in the Middle East.

In light of this, and according to the balance of payments report issued by the Central Bank of Egypt, foreign portfolio investments (indirect foreign investment) recorded a net outflow of about $4.4 billion during the first nine months of the fiscal year 2025/2026, compared to a net inflow of $2.1 billion during the same period of the previous fiscal year.

In contrast, net foreign direct investment inflows rose to $13 billion during the first nine months of the fiscal year ending June 30, 2026, compared to $9.8 billion in the comparable period of the fiscal year 2024/2025.

This growth in net foreign direct investment inflows contributed to reducing Egypt's overall balance of payments deficit by about 2.9 percent year-on-year during the period from July 2025 to last March to about $1.8 billion, coinciding also with an increase in net inflows in the capital and financial account to about $9.9 billion.

Meanwhile, the current account recorded a deficit of about $14.6 billion during the first nine months of the fiscal year ending last month, pressured by a 24.6 percent year-on-year increase in the merchandise trade deficit.

Balance of payments deficit falls to $1.8 billion in 9 months

In contrast, Egypt's balance of payments showed an improvement in the overall deficit during the first nine months of the fiscal year 2025/2026, declining by 2.9 percent year-on-year to about $1.8 billion compared to $1.9 billion during the same period of the previous fiscal year.

This improvement was supported by an increase in net inflows in the capital and financial account to about $9.9 billion, amid an increase in net foreign direct investment inflows to $13 billion.

In contrast, the current account recorded a deficit of about $14.6 billion during the period between July 2025 and the end of March 2026, affected by the rise in the merchandise trade deficit to $14.8 billion.

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Despite this, several sources of foreign currency helped limit the widening of the deficit during the mentioned period, most notably the increase in remittances from Egyptians working abroad by 32 percent year-on-year to reach $34.9 billion, along with a rise in tourism revenues by 14.9 percent to $14.4 billion, and an increase in Suez Canal revenues by 22.1 percent year-on-year to record $3.2 billion.

At the same time, foreign investments in Egypt's portfolio securities faced pressures during the first nine months of the fiscal year 2025/2026, recording a net outflow of $4.4 billion, compared to a net inflow of $2.1 billion during the same period of the previous fiscal year.

The Central Bank of Egypt explained that the period from January to March 2026 alone witnessed an outflow of investments worth $9.5 billion, coinciding with the outbreak of the conflict in the Middle East and the accompanying increase in uncertainty in global financial markets.

Record purchases by foreigners in Egyptian debt instruments

Available data indicate that foreign investments in Egyptian government debt instruments, known as hot money, amounted to about $11.6 billion from the beginning of 2026 until mid-July this month, recording net purchases of $8.76 billion last month, but they witnessed noticeable fluctuation with partial exits affected by regional geopolitical tensions.

The second quarter of this year recorded net inflows of about $11.66 billion, and despite these huge numbers that boosted the cash reserve, these investments are by nature characterized by rapid speculation, but with renewed tensions in the Middle East and the targeting of ships in the Strait of Hormuz, the secondary market for government debt recorded net sales and exits of $893 million in a single session.

Regarding dollar liquidity, the Central Bank of Egypt had announced days ago that Egypt's net foreign exchange reserves rose to $55.07 billion at the end of last June, compared to $53.134 billion in last May, an increase of $1.93 billion.

Egypt's foreign exchange reserves at the end of June 2026 reached a new record level, becoming the highest in the country's history.

The large and continuous growth in Egypt's net international reserves was supported by an improvement in the country's sources of foreign currency revenue, as Egyptian exports witnessed significant jumps since the beginning of 2025, the country's revenues from tourism increased, remittances from Egyptians working abroad recorded record increases, in addition to the significant growth in Suez Canal revenues.

Remittances from Egyptians working abroad continued their upward trend, jumping during the period from July 2025 to the end of May this year by 31.2 percent to reach about $43.1 billion, compared to about $32.8 billion during the same period of the fiscal year 2024/2025.

On a monthly basis, remittances rose during May 2026 by 13.5 percent to reach about $3.9 billion, compared to about $3.4 billion during May 2025.

Remittances from Egyptians abroad during 2025 recorded record flows, the highest ever, rising by 40.5 percent to reach about $41.5 billion, compared to about $29.6 billion during 2024.